Harmonic Trading: Bullish and Bearish Three Drives

Harmonic trading is a trading technique recognizing a specific pattern with the Fibonacci ratios. The technique assumes the patterns repeat themselves.

Harmonic trading is to identify these patterns and to identify when to enter or exit a position based on the historic cycles in the patterns.

The patterns are not 100% accuracy in connection to the Fibonacci ratios but approximately to the numbers. The important is to recognize the pattern.

The technique is useful to any time frame.

The Fibonacci Numbers
Harmonic Trading is based on the Fibonacci ratios. The primary ratios are the numbers 0.618, 0.786, 1.27, 1.618 and the secondary numbers are 0.382, 0.50, 1.00, 2.0, 2.24, 2.618, 3.14.

The most used numbers are the primary numbers; the ratios 2.24, 2.618, 3.14 are considered as extreme numbers.

The ratios are used to identify the cycle in the historical pattern and to identify the entry point, exit point and stop loss.

The Three Drives
A three drive is a 3 wave pattern following the Fibonacci numbers. The pattern could be a bearish or a bullish pattern.

A Bearish Three Drives
The pattern is illustrated in the image

The image illustrates a three wave cycle; the impulse waves are the Fibonacci numbers 1,27 / 1,618 and the corrective waves are the 0,618 / 0,786. At the point (3) the pattern will end and the price curve will be bearish. Point (3) is the exit point.

Calculation - Fibonacci numbers 0,618 and 1,27
An example; the price is 40 and rise to 50; the pattern rise with the numbers 0,618 and 1,27; the calculation is

0 – 1 (corrective wave)
40 – 50 =  10 * 0,618 = 6,18
50 – 6,18 = 43,82

1 – 2 (impulse wave)
40 – 50 = 10 * 1,27 = 12,7
43,82 + 12,7 = 56,52

1 – 2 (corrective wave)
40 – 50 = 10 * 0,618 = 6,18
56,52 - 6,18 = 50,34

2 – 3 (impulse wave)
40 – 50 = 10 * 1,27 = 12,7
50,34 + 12,7 = 63,04

63,04 is the exit point if the Fibonacci numbers are 0,618 and 1,27.

A Bullish Three Drives
The pattern is illustrated in the image

The image illustrates a three wave cycle; the impulse waves are the Fibonacci numbers 1,27 / 1,618 and the corrective waves are the 0,618 / 0,786. The pattern will end at the point (3) and the price curve will be bullish. Point (3) is the stop loss point and the entry point.

Calculation - Fibonacci numbers 0,618 and 1,27
An example; the price is 50 and decrease to 40; the pattern decreases with the numbers 0,618 and 1,27; the calculation is

0 – 1 (corrective wave)
50 - 40 = 10 * 0,618 = 6,18
40 + 6,18 = 46,18

1 – 2 (impulse wave)
50 - 40 = 10 * 1,27 = 12,7
46,18 - 12,7 = 33,48

1 – 2 (corrective wave)
50 - 40 = 10 * 0,618 = 6,18
33,48 + 6,18 = 39,66

2 – 3 (impulse wave)
50 - 40 = 10 * 1,27 = 12,7
39,66 - 12,7 = 26.96

The entry point and stop loss are set at the price level 26,96 if the Fibonacci numbers are 0,618 and 1,27.

SP500 Futures H4

SP500 Futures H4 Update here:
http://day-trader.pl/analizy/1095-sp500-futures-h4

Thanks,
Seb

WIG20 H4 Futures

General Overview for 05/09/2013 17:30 CET:

Invalidation line for this impulsive bullish count is @ the KEY LEVEL of 2067.

If it is broken, it is very probable that the wholegreen impulsive count will be invalidated.

Please trade accordingly.

Support/Resistance:

2067 - Swing Low  | Invalidation Line | KEY LEVEL | 

2145 - 78%Fibo

2250 - 50%Fibo

2267 - WS2

2314 - WS1

2365 - Weekly Pivot

2412 - WR1

2435 - Swing High

2464 - WR2

2511 - WR3

Trading Recommendations:

As long as KEY LEVEL @  2067 holds long side of the market shoud be played with TP @ 2438 min.

The first clue that someting is not as planned is when price would have broken below 2145. This level must hold.

Seb

Apple #AAPLE H1 Update

Apple $AAPL H1 Elliott Wave Analysys here:
http://day-trader.pl/analizy/1090-analiza-spolki-apple-h1-elliott-wave

Thank You,
Seb

Dow Jones Industrial Average Weekly, Daily & H4 Update

Dow Jones Industrial Average Weekly, Daily and H4 Analysys here:
http://day-trader.pl/analizy/1088-dow-jones-industrial-average-futures-tygodniwy-dzienny-i-h4

Thx,
Seb

Nikkei225 Futures Daily Update

General Overview for 01/09/2013 21:00 CET:
The corrective wave progressionin shape of the triangle looks finished and timming is right for the abcde triangle to be completed.
To confirm the bullish outlook price must break above the gloden trend line and then green triangle trend line.
Otherwise more downside correction is possible if the level of 13 000 is broken.
New highs are very possible with this count.
Support/Resistance:
15972 - Swing High
14612 - WR3
14177 - WR2
14175 - 23%Fibo
14000 - WR1
13617 - Weekly Pivot
13434 - WS1
13046 - WS2
Trading Recommendations:
Buying the 13617 level with SL just below  golden  trend line(50points) seems to be the way to go in anticipation of impulsive wave  to the upside.

Sebastian

IF YOU WANT TO RECEIVE MORE DETAILED CHARTS WITH  ENTRY LINES, SL,TP AND SUP/RES LEVELS JOIN WWW.RESISTANCEINVEST.COM SIGMA_SQUARE SERVICE NOW!

Gold XAUUSD H4 Update

We are not done with the upside just yet, still one more wave up is missing.
Then the question is: if the recent price advance is ABC Correction of some higher degree OR it is the begining of new impulisve wave up.
According to this count the bottom of wave 4 of a cycle degree has been done and price is now in impulsive bullish development to the upside.

Take care,
Seb

Guest Article: US Consumer Sentiment Investigates EUR/USD Fall

US Consumer Sentiment Instigates EUR/USD Fall

Friday’s trading saw the dollar strengthen against the euro, following revised consumer sentiment data as the United States continues its economic improvements.

During US trading, the Eurodollar was at 1.3198, down by 0.32 percent. This follows a low for that session of 1.3174. The high was 1.3255. Technical analysis shows the level of support was likely to be around 1.3166, held from the lowest point of the 25^thJuly. Resistance would be found at 1.3398, the high of just two days earlier.

Revised Sentiment Index

82.0 was the headline figure for the August US consumer sentiment index, issued by Thomson Reuters and the University of Michigan. The release for July had been for a figure of 80.0, and the revision had been expected to add just 0.5. The 2.0 increase came as somewhat of a surprise, and certainly had an impact on the Eurodollar’s slide.

Expectations were also high for the Chicago purchasing managers’ index, which had been 52.3 in July. The final figure came in at a strong but expected 53.0.

The Bureau of Economic Analysis also released data on Friday that showed a small increase in consumer spending. July saw a 0.6 percent rise, and 0.3 percent was expected for August, but the figure was only 0.1%. This is one of the more volatile indicators however, and can be heavily influenced by the automotive industry.

As with all recent strong data, the PMIs and CSIs fuelled belief that the Federal Reserve is likely to begin reigning in its $85 billion per month bond buying scheme. Bernanke and co have previously suggested that tapering would not begin until there is further evidence that the recovery is well on track.

The current programme of stimulus has the effect of weakening the dollar, especially against the euro. EUR/USD is likely to be bearish as the prospect of ending the practice increases.

September now looks like the likely month for moderation to begin.

Euro Data

Official Eurozone data was also reasonable, despite the single currency struggling against the dollar.

The consumer price index increased by 1.3 percent in August. Slightly down on July’s figure of 1.6 percent, and predictions of 1.4 percent, but a reasonable level of inflation nonetheless.

The unemployment rate was unchanged as expected, coming in at 12.1 percent. This is one of the major benchmarks for any policy changes, and until it begins to alter, the euro is likely to be quiet.

Major differences between European economies are also contributing to the dollar’s gain. While countries such as the UK and Germany are regularly posting strong performance indicators, the south of the continent is still struggling. The ECB is looking to curb this disparity by maintaining similar banking rules across the Eurozone, but this may no longer be possible.

The continent may have emerged from recession as a whole, but there are still major issues, which will ensure that the dollar continues to strengthen against it. The potential conflict in Syria is also encouraging investors to shift over to the dollar, which is still considered a safe haven.

With tapering on the horizon, and Eurozone data steady, the EUR/USD outlook is bearish. 

Richard Boothroyd